Tuesday, July 29, 2008

Survey: Small Businesses like Banks—But Rely On Back Up Capital Sources Too

Results of a new survey were released last week showing that small businesses believe banks are one of the most trusted sources of capital - which is not a surprise. And, as you would expect, the need for working capital is intense, with 87% of this survey’s respondents indicating that it is important to have access to a readily available and predictable source of capital.

However, another finding within this survey highlights an opportunity. Small business owners wish that banks would offer other options when they are unable to provide them the capital they need. 42% said that they think having a back up is important (read that as lost opportunity for the bank). Yet, 69% of respondents said they would consider an alternative offered by their bank if it were offered!

Alternative Options: the Antidote to the Credit Crisis
Banks are missing a valuable opportunity to show value by offering more options as credit conditions and lending restrictions tighten. Working with alternative capital providers can be a benefit for both the financial institution and the small business customer in what could be dubbed the "antidote" to the credit crisis.

As we’ve discussed on this blog, a Merchant Cash Advance is an increasingly popular solution for working capital. However, it can also be a solution for banks that want to retain the profitable business checking accounts of small business customers rejected for loans or other bank financing. The product can be offered at the time the loan is declined, and the bank can look like a hero (instead of an obstacle) by offering a product that does not require personal collateral and can deposit money in the business' checking account in as few as 3 days.

Merchant Cash Advance to the Rescue!
Merchant Cash Advance providers are able to approve requests that banks deny because decisions focus less on consumer-oriented measures of viability (like FICO or other personal credit scores) and place greater emphasis on the business’s track record of success. This is important because many successful business owners have mediocre personal credit - they are too busy running the store to pay their own bills. Or, they invest in the business before paying their home utility bill.

What do you think?
Would it be helpful for your bank to offer another alternative? Is a Merchant Cash Advance a logical alternative? If you were declined for a loan or other funding product, would you be more likely to consider a Merchant Cash Advance from your bank if offered? Would your opinion of your bank be enhanced if they offered this product?


Darla said...

Keep up the good work.